By Julie Jargon
McDonald's Corp. said it plans to increase its payout to
shareholders by 10% to 20% over the next three years, rewarding
investors at a time when the company is under pressure to improve
sales performance in its core U.S. market.
The burger giant plans to return between $18 billion and $20
billion to shareholders through stock buybacks and dividends
through 2016, McDonald's said on Wednesday. Between 2011 and 2013,
McDonald's buybacks and dividends totaled $16.4 billion, according
to securities filings.
The announcement came as McDonald's Chief Executive Don Thompson
offered other details of plans to bolster the company's business
after a stretch of weak growth and lackluster stock performance at
an investor conference on Wednesday in New York.
McDonald's last month reported that its profit for the first
three months of 2014 dropped 5.2% from a year earlier. Also in
April, the company said same-store sales in the U.S. declined 1.7%
for the quarter and 0.6% for March, the fifth straight month of
declines in the company's biggest market in terms of restaurant
numbers. Global same-store sales rose 0.5% for both the quarter and
March.
McDonald's share price has risen about 15% since Mr. Thompson
became CEO on July 1, 2012, roughly half the increase of the Dow
Jones Industrial Average during the same period. In midday trading
Wednesday, after the company's announcement, its shares edged down
0.4% to $101.90.
Many companies have increased cash returns to shareholders in
recent years, some under pressure from investors. McDonald's had
telegraphed its cash move, with Chief Financial Officer Pete Bensen
recently telling investors that the company would look at financial
means of improving its performance, including selling more
company-owned restaurants to franchisees and cutting costs.
Mr. Thompson on Wednesday went into more detail about some of
its refranchising plans, saying McDonald's aims to refranchise at
least 1,500 restaurants by the end of 2016, mainly in its
Asia/Pacific and Middle East, Africa and Europe business segments.
The target reflects an increase in refranchising of more than 50%
over the previous three-year period.
McDonald's reported $2.74 billion in cash and equivalents as of
March 31, compared with $1.87 billion a year earlier.
However, the company told Wednesday's investor conference that
the targeted cash returns aren't all coming from existing cash,
according to David Tarantino, an analyst at Robert W. Baird &
Co. McDonald's is expected to fund the moves by ongoing operating
cash flows, proceeds from planned sales of company-owned
restaurants to franchise and license partners, and additional debt,
he said.
Write to Julie Jargon at julie.jargon@wsj.com
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